Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 21 March 2018 at 2:07 GMT

Morning Report APAC: Oil rebounds, social media stocks under scrutiny

APAC Sales Trading Desk / Saxo Capital Markets


  • Crude prices have soared to a three-week high
  • Today's FOMC meeting is likely to impact forex, bonds and equity markets
  • The Tokyo Stock Exchange is closed for a public holiday
  • A 54% chance of a Bank of England rate hike is priced in for May
  • India has scrapped its 20% sugar exports tax, putting pressure on prices

By Saxo APAC Sales Trading


Speeches, Singapore time

Overnight news, trade friction

  • President Donald Trump is preparing to impose a package of $60 bn in annual tariffs on Chinese products, following through on a longstanding threat that he would punish China for intellectual property theft, and create more U.S. jobs.
  • The tariff package, which Trump plans to unveil by Friday, was confirmed by four senior administration officials. (Washington Post)
  • Europe won't agree to US conditions for receiving exemptions from steel and aluminum tariffs, French Finance Minister Bruno Le Maire said. The EU expects to be fully exempted from the duties

Overnight news, UK inflation

  • Inflation was weaker than expected at +0.4% MoM (Exp. +0.5%, Prev. -0.5%) and 2.7% YoY (Exp. 2.8%, Prev. 3.0%) and Core at 2.4% YoY (Exp. 2.5%, Prev. 2.7%). There is a 54% chance of hike priced in for May.



  • Down one day, up the next ... last night USD rallied against most G10 currencies ahead of the FOMC meeting. There is speculation that FOMC chair Jerome Powell will be more hawkish than what the market expects. Some economists believe a four-hike message for 2018 is possible.
  • The euro remains in the range of 1.22/1.25. The Australian dollar is on a strong downside trend attempting to break below 0.7700. The next target is 0.7528, which was the start of the rally in December.
  • Emerging Markets: USD found good support against EM overnight but the overall interest in very mild from hedge funds.  There are decent sellers of the forward curve in USDCNH, mainly driven by the corporate sector.

Foreign exchange movements


  • There is a $3Bn strike of USDJPY at ¥106 expiring today.
  • There is some pressure to buy CrossJPY from funds
  • The market seems still short AUD vega after the spot move.


  • The US10 year yield rose slightly ahead of the FOMC decision tonight. US10s Yields has been rather supported at 2.8 for the past month.




US equities

  • The Dow Jones (+116 points) and S&P 500 (+4 points) both gained ground; stocks climbed as the Federal Reserve started its two-day monetary policy meeting, with most market participants expecting a rate hike. There has been a knock-on effect in the social-media universe, as Facebook Inc (FB) data crisis draws the attention of the U.S. Federal Trade Commission and Congress. Twitter Inc. sank as much as 11% intraday, as they were subjected to regulatory scrutiny.
  • Shares in MuleSoft Inc (MULE) jumped 27.16% to 42.00 after reported that Inc (CRM) was in advanced talks to buy the software company. The report said that a deal could be announced this week at the earliest, though they said that nothing had been formally agreed upon yet. Salesforce shares are up 0.9% in Tuesday trading. MuleSoft went public a year ago, and shares had nearly doubled from their IPO price of $17 prior to the report. MuleSoft received venture funding from Salesforce and shares are now up 67% in the past 12 months, while Salesforce's stock is up 52%
  • Back in the spotlight, shares in organic light-emitting diode tech maker Universal Display (OLED) rebounded 6%, closed at $115.90, erasing a previous 12% drop, prompted by that Bloomberg article speculating Apple (AAPL) is developing its own display technology for the iPhone. But some bulls are coming to Unviersal’s defence today as Goldman Sachs’s Brian Lee reiterates a buy rating and a $190 price target, writing that his conversations with people in the micro LED "supply chain" suggest to him that "visibility remains low on potential for commercialization, let alone on timing. "Hence, "we see risk-reward at 12 times implied 'peak EPS' for OLED shares as attractive as it’s been for some time."

European equities

  • European stock markets closed closed higher Tuesday afternoon as investors focused on earnings ahead of a Federal Reserve meeting. U.K.'s FTSE gained 18 points and Germany's Dax closed up 90 points.
  • Financial services was the top performing sector on earnings, finished up 1.4%. Partners Group (PGHN) rose 3.5% to CHF 731.50 after announcing higher profits for 2017 and a gross client demand between 11 billion and 14 billion euros ($13.58 and $17.28 billion) in 2018.
  • Bellway (BWY) was among the top gainers across Europe after a 17% increase in profit in the first half of its fiscal year. The UK property developer closed 3.5% higher to GBp 3,156.

Hong Kong equities

  • The Hang Seng Index (HSI) gained 36 points or 0.1% to 31,549, stabilizing at around 3100 point, as social media news impacted tech shares. Tencent (700.HK), which was set to announce results on Wednesday (21 March), opened lower 1.2% and fell below $460, last printed at $466.60.
  • Best-performing blue-chipper Sunny Optical (02382.HK) soared 8.6% and trading volume was more than triple the 20-day average on its 2017 net profit amounting to RMB2.9 billion, up 128.3% yearly. Positive sentiment drove analyst raising its target prices as well, target prices lifted to $185, $160 and $175 by Daiwa, JP Morgan and Citigroup respectively.
  • On the earnings front, Ping An (2318.HK) announced the annual results for 2017. Net profit hiked 42.8% yearly to RMB89.088 billion, topping estimates, versus forecast net profit of RMB73.374-82.626 billion by brokers. EPS equalled RMB4.99. A final dividend of RMB1 was declared. The dividend payout was raised to 30.8%. Its share price fell, and closed at $HK91.25.
  • Country Garden (2007.HK), Chairman, Yeung Kwok Keung, said government controls imposed on the property market are aimed at facilitating the healthy development of market. The company  is expected to seek balanced development in first to fifth tier cities. And 2018 sales growth to beat the 2017 level, share prices remain muted, closed off at $HK16.26.


Trade friction heats up ... Donald Trump is about to slap $60 bn in tariffs on China's exports, as he punishes China for alleged theft of US intellectual property and jobs. Photo: Shutterstock

For more on forex, click here.

– Edited by Robert Ryan

This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Follow us on @SaxoStrats on Twitter

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